Preliminary Results

RNS Number : 5487Y

IMI PLC

02 March 2012

 



2 March 2012

IMI plc Preliminary Results

IMI plc, the global engineering group, today announces its preliminary results for the year ended 31 December 2011.

Financial highlights:			2011		2010		% change
	Revenue		£2,131m		£1,911m		+12%
	Segmental operating profit 1		£374.1m		£319.7m		+17%
	Segmental operating margin		17.5%		16.7%
	Profit before tax	- adjusted 2	£363.4m		£304.4m		+19%
		- as reported	£301.4m		£306.1m		-2%
	Basic earnings per share	- adjusted 3	81.5p		66.3p		+23%
		- as reported	63.2p		70.4p		-10%
	Dividend	- Total for year	30.0p		26.0p		+15%
Revenue, profit and earnings per share measures quoted above are based on continuing operations.

Roberto Quarta, Chairman of IMI, commented:

"IMI has delivered another strong set of results in 2011 with good growth and record underlying profits, margins and earnings.  In light of this performance, and our confidence in the future prospects for the business, we are pleased to propose an increase in the full year dividend of 15%.

Whilst the global macro-economic outlook remains uncertain, we are committed to our well defined plans to drive strategic convergence, accelerate future growth, deliver further margin improvement and make greater use of our strong balance sheet in delivering value enhancing acquisitions. 

Based on current market conditions we remain optimistic that the Group will make further progress in 2012."

1    before exceptional items (restructuring, acquired intangible amortisation,  the reversal of  economic hedge contract gains and in 2010 the UK employee benefit curtailment gain) totalling  £59.9m (2010:  £10.6m) 2     before exceptional items (restructuring, acquired intangible amortisation, financial instruments and in 2010 the UK employee benefit curtailment gain) totalling  £62.0m (2010: £1.7m credit) and including economic hedge contract gains and losses totaling £4.1m (2010: £2.7m)

3     before the after tax cost of exceptional items totaling £57.9m (2010: profit of £0.5m)

CHAIRMAN'S STATEMENT

In my first set of results since taking over as Chairman in November, I am pleased to report a strong performance by IMI in 2011 with good organic growth and further margin improvement.  Group revenues grew by 12% on a reported basis and by 5% on an organic basis, after adjusting for recent acquisitions and for exchange rate movements, reflecting improved trading conditions in most of our end markets.  Segmental operating profit increased by 17% and the operating margin improved from 16.7% to 17.5%. Adjusted earnings per share increased by 23% to a record 81.5p. 

These results together with our strong performance on cash conversion and confidence in the future prospects of the Group lead the Board to recommend that the final dividend be increased by 12% to 19.0p.  This makes a total dividend for the year of 30.0p, an increase of 15% over last year's 26.0p. 

Collectively, our three Fluid Controls businesses performed well, with a particularly strong performance by Fluid Power.  Severe Service margins were impacted by an adverse sales mix and some operational challenges associated with the move to lower cost facilities.  Overall, on an organic basis, Fluid Controls revenues grew by 6% with operating margins increasing to 18.7% from 18.3% last year. 

In Retail Dispense, both Beverage Dispense and Merchandising continued to focus on improving the product mix and the quality of their businesses.  Revenues grew by 3% on an organic basis despite the continued targeted exit from some lower margin product lines in the Beverage business.   Operating margins have again benefited from this improving mix, increasing to 13.7% from 11.8% last year. 

The IMI Way is our code of responsible business which targets the very highest standards of ethical business and compliance. The Group has been reinforcing the core values and messages of the IMI Way with regular training since its launch in 2009.  In 2011, each of our main businesses held IMI Way days where, as well as receiving targeted training, employees engaged in a number of worthwhile projects in their local communities.  In 2012 we have planned a single IMI Way day for the whole Group, encompassing over 15,000 employees.   

I should like to recognise Norman Askew, who retired as Chairman of the Board on 1 November 2011.    Norman led the Board for over six years, during which time IMI made great progress in its development into a leading global engineering businesses, with a clear focus on the precise control of fluids in critical applications.  I would personally like to thank Norman for his major contribution to the Group and the invaluable help he provided me during the succession period. 

We were pleased to announce in May 2011 that Sean Toomes, President of Indoor Climate, had been promoted to the Board and assumed the important additional responsibilities for developing IMI's key account management strategy and corporate responsibility agenda.

Since joining the Board I have had the opportunity to visit many of IMI's operations.  I have been extremely impressed by the skills, expertise and energy displayed by my colleagues across the world and I am grateful for their continued efforts and enthusiasm in helping to deliver this year's strong results.  We continue to invest in our people and have once again this year conducted an employee engagement survey to ensure that we continue to provide a working environment that allows them to contribute to their full potential. 

IMI is a strong company, with market leading technology in many of its global niche markets.  I believe that we are well placed for the future with a clearly defined strategy which should deliver further sustainable margin improvement and long term growth, notably through the acceleration of our new product agenda and increased exposure to the faster growing emerging markets.    

CHIEF EXECUTIVE'S STATEMENT

2011 was another year of good progress for IMI, with organic revenue growth of over 5%, record operating margins of 17.5% and encouraging developments across most areas of the Group. 

Against a macro-economic background where uncertainty increased markedly in the second half, the results reflect the continued benefits that are being derived from the fundamental reshaping of the Group over the last decade. The consistency of approach has delivered a significant and sustainable improvement in the underlying quality and profitability of the Group. 

The macro-economic environment remains uncertain with limited GDP growth forecast in developed western economies in the medium term and with global growth being propelled largely through emerging economies.  Within this context current trading patterns have nevertheless remained stable as we enter 2012, with no material changes in trends witnessed over the last few months.

We remain committed to our three pronged strategy of gradually increasing each year the proportion of our business in our favoured end market niches ('strategic convergence'); accelerating our growth through increased investment in new products and emerging markets; and maintaining a long established upward trend in margins through a process of pricing optimisation and year on year reductions in our manufacturing and supply chain costs.

Strategic convergence

During the year we continued to develop our long term thinking around strategic convergence, providing a route map for gradually increasing the percentage of our revenues in our sweetspot.  For IMI, strategic convergence means prioritising both organic and acquisition investment in favour of differentiated fluids technologies, applied to global market niches where we already have, or can aspire to, a leadership position, and which benefit from a heightened exposure to attractive market trends.  These trends include climate change, resource scarcity, urbanisation and an ageing population.  We believe these trends are set to be with us for generations, surviving economic cycles and our increasing exposure to them will deliver a significantly higher level of growth over the long term. 

Today just over half of IMI's operations are positioned within the sweetspot which is characterised by higher growth, higher margins and greater resilience.  Over time we would expect to increase significantly this proportion through disciplined choices around customer selection, new product development and acquisitions.  To support this objective, each of our platform businesses has made an assessment of the current strategic sweetspot positioning, and has developed a set of plans for increasing convergence over the next few years. 

Growth acceleration

Against the background of global macro-economic uncertainty with limited market growth expected in Western economies, IMI needs to allocate its resources carefully to drive future growth.  In particular, we will focus on three principal areas:

·      Acceleration of new product activity with the prioritisation of product applications with high exposure to favourable mega trends and to emerging markets.

·      Significant expansion of our emerging markets presence, through accelerated investment in sales and engineering resource in the key targeted territories.

·      Supplementing our organic initiatives through an active acquisition programme, prioritising businesses with high sweetspot exposure and a strong emerging markets presence.  In this regard we were pleased to announce two Severe Service acquisitions, Remosa SpA and Grupo InterAtiva, in February 2012.  These businesses significantly strengthen our isolation valve capabilities and our emerging market exposure, notably in South America.   We retain a strong balance sheet and have a number of additional acquisition opportunities in the pipeline.

Margin sustainability

Funding for our increased investment in growth will be met through a continuation of our ongoing initiatives to improve margins which remains therefore a key focus for us.  As we highlighted in the interim results we have built up a strong track record over many years of delivering price and value benefits comfortably in excess of any labour cost and supply chain inflation, the so called "inflation equation", irrespective of the macro-economic circumstances. 

Looking forward we expect to continue winning the "inflation equation" over time through optimising prices, driving down supply chain costs and delivering substantial productivity gains. In addition, our long term programmes to move more manufacturing and procurement to lower cost countries is continuing and we are gaining traction on our initiatives around supplier rationalisation and value engineering.

Outlook

IMI has delivered another strong set of results in 2011 with good growth and record underlying profits, margins and earnings.  In light of this performance, and our confidence in the future prospects for the business, we are pleased to propose an increase in the full year dividend of 15%.

Whilst the global macro-economic outlook remains uncertain, we are committed to our well defined plans to drive strategic convergence, accelerate future growth, deliver further margin improvement and make greater use of our strong balance sheet in delivering value enhancing acquisitions. 

Based on current market conditions we remain optimistic that the Group will make further progress in 2012.

FINANCIAL AND OPERATIONS REVIEW

Results summary

Revenues increased by 12% to £2,131m (2010: £1,911m).  After adjusting for an exchange rate benefit of £19m and the contribution from acquisitions, the organic revenue increase was 5%. 

Segmental operating profit was £374.1m, an increase of 17% on last year.  At constant exchange rates and excluding acquisitions segmental operating profit rose by 9%.  The segmental operating margin was 17.5% (2010: 16.7%). Operating profit was £314.2m (2010: £309.1m), after restructuring costs of £23.5m, acquired intangible amortisation of £32.3m and reversing net economic hedge contract gains of £4.1m. The restructuring costs principally relate to the costs of relocating fluid controls manufacturing activities to low cost manufacturing locations and other value chain improvements, particularly in the Severe Service division. The Group expects to continue to incur restructuring costs in 2012 of approximately £20m as part of this ongoing initiative.

Interest costs on net borrowings were £16.9m (2010: £15.3m).  The net pension financing credit under IAS19 was £6.2m (2010: £nil). After adding the net expense on derivatives of £2.1m (2010: gain of £12.3m), the total net financing costs were £12.8m (2010: £3.0m).

Adjusted earnings per share (excluding the after tax impact of exceptional items) were 81.5p (2010: 66.3p), an increase of 23%.  Profit before tax from continuing operations was 1.5% lower at £301.4m (2010: £306.1m).  Basic earnings per share reduced 10.2% to 63.2p (2010: 70.4p).

Mergers and Acquisitions

On 17 February 2012, the Group acquired Grupo InterAtiva (InterAtiva), a Brazilian isolation valve business located in Sorocaba, near Sao Paolo, from its founding partners for an initial cash consideration of £22m and contingent consideration up to a maximum of £21.2m to be paid based on its performance over the next three years.  The consideration is being funded out of IMI's existing resources and banking facilities. In the 2011 calendar year, InterAtiva's unaudited sales were £12m and underlying EBITDA was £3m. All of its sales are in the fast-growing South American markets. 

On 16 February 2012, the Group acquired Remosa SpA and related companies (collectively Remosa), a leading engineering business specialising in valves and related flow control products for severe applications primarily in the petrochemical market, for an enterprise value of approximately £84.7m (€100m), being cash consideration of £69.8m (€82.4m) and debt assumed of approximately £14.9m (€17.6m).  The consideration was funded out of IMI's existing resources and banking facilities. The main Remosa manufacturing facility is located in Sardinia. In the 2011 calendar year, Remosa's unaudited sales were £40.7m (€48m) and underlying EBITDA was £6.8m (€8m).

On 17 October 2011, the Group acquired 100% of the share capital of TH Jansen Armaturen GmbH (THJ) for an enterprise value of £15.0m (€17.5m). THJ designs, manufactures and sells isolation valves for the Iron & Steel industry from its manufacturing facility near Saarbrücken in Germany. In 2010 THJ's sales were £13.7m and its underlying EBITDA was £2.0m. 

Exchange rates

The movement in average exchange rates between 2010 and 2011 resulted in our reported 2011 segmental revenue and segmental operating profit being 1% and 2% higher respectively.  Whilst the US Dollar was 4% weaker against Sterling than in 2010, this was more than offset by all other major currencies being stronger. If the exchange rates as at 28 February 2012 of US$1.59 and €1.18 had been applied to our 2011 results, it is estimated that revenue and segmental operating profit would both have been 1% lower.

Cash flow

The net cash inflow from operating activities was £217m, compared to £257m last year.  Capital expenditure on property, plant and equipment amounted to £52m (2010: £46m) and was 1.2 times depreciation (2010: 1.0 times).  Major cash outflows in the year included tax of £91m, and dividends of £89m. In October the Group paid £12.5m on completion of the acquisition of THJ. In addition the Group purchased £7.8m of IMI shares for employee share plans. The Group made additional contributions of £53m into the UK pension fund in line with the recently agreed funding recovery plan detailed further below.  Before repaying £16m (2010: drawing down £14m) of net debt the total cash inflow for the year was £44m (2010: £27m).

Balance sheet

The balance sheet remains strong and net debt fell 26% to £108m (2010: £145m). The cash inflow during the year was £44m, and £2.5m of debt was taken on as part of the THJ acquisition. There was an unfavourable translation impact of £4m on the revaluation of net foreign currency debt. The ratio of net debt to EBITDA was 0.3 times at the end of the year (2010: 0.4).

Intangible assets decreased to £497m from £519m in the prior year, because the amortisation of acquired intangibles (particularly the Zimmerman & Jansen order book) exceeded the acquired intangibles and goodwill recognised on the THJ acquisition. Expenditure capitalised during the year on non-acquired intangible assets (development costs and software) totalled £6.8m.

The net book value of the Group's investment in property, plant and equipment at 31 December 2011 was £248m (2010: £241m).  The increase arose because capital expenditures of £52m (2010:  £46m) more than offset depreciation of £44m (2010:  £45m).

Net working capital balances increased by £13m during the year, the increase in trade receivables and inventory totaling £81m, offset by an increase in payables of £68m. The increases reflect higher trading levels towards the end of the year and a stock-build in our low-cost manufacturing sites. The increase in creditors also reflects improved terms with certain of our suppliers in comparison to the previous year.

Shareholders' equity at the end of December was £565m, an increase of £39m since the end of 2010, which includes the profit attributable to the shareholders for the year of £200m, less an after-tax actuarial loss on the defined benefit pension plans of £69m and the 2010 final and 2011 interim dividends totalling £89m.

Tax

After the tax charge for the year of £97.7m (2010: £92.5m), the profit from continuing operations after tax was £203.7m (2010: £213.6m).  The effective tax rate for the Group before exceptional items reduced to 28% (2010: 30%) during the year as a result of business re-organisations, together with a strong focus on global tax incentives and tax compliance management.  These commercial initiatives are expected to continue to improve the Group's taxation profile.  In addition, exceptional tax relief of £15.1m and exceptional tax charges of £11.0m, netting to a tax credit of £4.1m (2010: £1.2m charge), arose in connection with business restructuring and other exceptional costs. Taxes paid in the year of £90.9m (2010: £56.3m) have increased due to the significant growth in profits in the previous year, but remain below the level of the tax charge.

Pensions

The net accounting liability for defined benefit obligations was £204m (2010: £199m). Of this amount, the main UK fund represents our largest employee benefit obligation and had a net accounting liability of £102m (2010: £110m). This fund was closed to new entrants at the end of 2005 and to future accrual on 31 December 2010. 

A payment of £16.8m was made to the UK fund in July 2011. The latest triennial actuarial valuation of the UK fund as at 31 March 2011 has now been completed.  This valuation showed a funding deficit at 31 March 2011 of £120m.  A revised recovery plan has been agreed with the fund Trustee and as a result a contribution of £36.1m was paid in December 2011. Thereafter contributions will revert to the previously agreed annual payments of £16.8m until 2016 or full funding if sooner.

During the year the Group offered certain members the opportunity to participate in an Enhanced Transfer Value exercise, which was finalised as at 31 December 2011.  This exercise resulted in enhanced benefits for the members but a reduction in the liability of £11.7m which after accrual for the payment of the enhancements and national insurance resulted in a £2.1m gain in the 2011 income statement.

Operations review

The following review of our business areas for the year ended 31 December 2011 compares the performance of our operations, as reported under IFRS8: Operating Segments, with the year ended 31 December 2010.  References to organic growth exclude the results of acquisitions for the period they were not in the comparators and are on a constant currency basis.  This section also comments on current market conditions in each of our businesses.

Severe Service
Revenue	£572m	(2010: £452m)
Operating profit	£88.9m	(2010: £78.4m)
Operating margin	15.5%	(2010: 17.3%)

Our Severe Service business delivered revenue growth of 27% including the results of Zimmermann & Jansen (Z&J) and TH Jansen (THJ) since acquisition. Organic revenue increased 2% for the full year, reflecting a stronger second half performance with organic growth of 5%.

Shipments of valves continued to be strong into liquefied natural gas (LNG) applications, offsetting the weaker performance in the Fossil Power sector resulting from the softer order intake in the second half of 2010, and in Nuclear, where activity levels have been affected since the incident in Japan in March 2011. 

Total order intake for Severe Service was up 2% for the year and the order book ended the year 16% higher than at the start of the year as order intake once again outpaced shipments. As previously indicated, margins were impacted by a combination of lower new valve margins, notably in the nuclear sector, a less favourable aftermarket mix and higher operational costs in our new facility in Brno.  Overall margins for the year were 15.5% compared to 17.3% in 2010.

Z&J performed well with both order intake and shipments showing good growth for the full year.  We were pleased to announce the acquisition of THJ on 17 October 2011 for an enterprise value of £15.0m.  THJ is highly complementary to Z&J and will significantly enhance Z&J's capabilities as a leading global provider of custom engineered valve, actuation and control solutions for critical in-plant processes in the Iron & Steel sector.  The acquisitions of Remosa SpA and Grupo InterAtiva in February 2012 significantly strengthen our isolation valve capabilities and our emerging market exposure.

The strong order book at the year-end gives us confidence that the business will demonstrate good revenue growth in 2012.  Margins in the first half of 2012 are expected to be at similar levels to the second half of 2011. Margins should improve in the second half with higher new valve margins and operational improvements at our facility in Brno. 

Fluid Power
Revenue	£767m	(2010: £685m)
Operating profit	£150.5m	(2010:£113.7m)
Operating margin	19.6%	(2010: 16.6%)

Fluid Power continued to perform strongly with end markets holding up well despite macro-economic uncertainty increasing as the year progressed.  Whilst organic growth in revenues slowed to 6% in the second half of the year against tougher 2010 comparators, organic growth for the full year was 11%.   

We have continued to see good momentum in our key global sector business, which focuses on bespoke solutions for key original equipment manufacturer (OEM) customers in global niche markets.  This grew at 14% in the full year, compared to 9% for the rest of the Fluid Power business. Of the five key global sectors Commercial Vehicles, Energy and Rail grew strongly up 31%, 14% and 9% respectively with Life Sciences and Food & Beverage broadly unchanged.  Overall our targeted sectors now represent 43% of total Fluid Power revenues. 

Our internet, phone and catalogue based aftermarket solution, Norgren Express, continued to perform well, up nearly 10% globally, as we leveraged the proven business model in Europe across the wider Norgren global business.  North America, in particular, showed strong growth with a number of initiatives to support the aftermarket including a new US webstore. 

The business has continued to focus on margin improvement with ongoing programmes to transfer more manufacturing to low cost sites in China, the Czech Republic and Mexico, to optimise pricing, to drive new product development and to deliver further savings from value engineering and supplier rationalisation.  This has resulted in a further improvement in margins with full year margins of 19.6% and margins in the second half reaching our new 20% objective for the first time. 

We have again surveyed our key customers across all our markets to gauge their views on the demand outlook for 2012. Within the Commercial Vehicle sector we expect to see further weakening in Europe, partially offset by improved demand in North America. In Fluid Power markets more generally, demand in Europe would appear to have stabilised at levels similar to last year whilst customers are indicating reasonable growth in North America and good growth in Asia Pacific. Based on this and current demand patterns  we expect the business to show some growth in 2012 with the potential for further progress on margins.

Indoor Climate
Revenue	£310m	(2010: £296m)
Operating profit	£68.2m	(2010: £70.3m)
Operating margin	22.0%	(2010: 23.8%)

Indoor Climate revenues were up 2% on an organic basis for the full year with good growth in the first half offset by a weaker second half performance, which was impacted by wholesaler destocking and warmer weather across Europe during the important autumn heating season.  The new construction market in Europe remained very subdued and performance continued to be underpinned by good refurbishment activity levels.   Overall, refurbishment activity represented more than two thirds of sales in the year, reflecting the drive to improve energy efficiency within existing buildings to comply with ever more stringent legislation. 

In line with IMI's aim to accelerate future growth, we increased investment in a number of key areas during the year.  We continued to invest in educating the market to help drive demand for our energy efficient products and solutions with around 83,000 customers attending one of our seminars during the year with particular focus on North America, Germany and China.  This is an increase of 25% on 2010.  We also invested in a number of centres designed to demonstrate hydronic control to our customers and recruited 50 more hydronic sales engineers.  During the year we have also made good progress in developing our new range of balancing and control valves which will expand our overall market opportunity.

Operating margins in the second half of 23.8% were broadly in line with the underlying margins achieved in the second half of the prior year.  Full year margins were 22.0%, down from the 23.8% achieved in 2010.  We were successful in recovering higher input costs and offsetting the impact of exchange rate movements on our businesses in Sweden and Switzerland which affected the first half margin performance.

Underlying new construction markets in Europe are expected to remain weak in 2012 and we are continuing to focus our efforts on refurbishment activity, growing the business in emerging markets and on new product development.  The ongoing drive for improved energy efficiency positions us well for accelerating growth over time.   

Beverage Dispense
Revenue	£317m	(2010: £315m)
Operating profit	£41.1m	(2010: £32.0m)
Operating margin	13.0%	(2010: 10.2%)

Beverage Dispense continued to perform well during the year with overall organic revenue growth of 3% on 2010.  We continued to exit a number of older, more commoditised, lower margin product lines which accounted for over 4% of revenue indicating an underlying organic growth of around 7% for the full year.   

The strongest markets were in the Americas where revenues grew by 10%.  This helped to offset more challenging market conditions in Europe and in Asia Pacific, where we continued to see lower levels of capital investment by the major brand owners, particularly in China. 

We remain focused on improving the quality of the product mix in the business, accelerating growth of higher margin new products for dispensing healthier and indulgence beverages such as smoothies, water, juice and frozen beverages whilst continuing the product exits noted above.  This continued focus delivered a 28% increase in operating profit to £41.1m and resulted in another strong uplift in returns with an overall operating margin for the year of 13.0% (2010: 10.2%).  It is expected that margins will continue to improve in 2012 based on new product contributions, pricing optimisation, cost management initiatives and further low margin product exits. 

Whilst North America continues to show signs of some improvement, European markets are likely to remain subdued in 2012. There are a number of major new product development opportunities which have the potential, in time, to both accelerate our growth and further enhance our margins.

Merchandising
Revenue	£169m	(2010: £169m)
Operating profit	£25.4m	(2010: £25.3m)
Operating margin	15.0%	(2010: 15.0%)

Overall organic growth for the year was 3%.  As expected, after strong growth in the first half, the second half was lower mainly due to the large automotive project that shipped in the second half of 2010.   During the year we saw good growth in our cosmetics business and also won a number of major cosmetics contracts in Europe which will ship over the next two to three years. Our food and beverage business also performed well and the automotive sector, which whilst modestly down reflecting the aforementioned large contract, continues to show signs of improvement with dealers once again investing in their showrooms. 

During the year we opened the In-Vision retail science laboratory in Milwaukee, US.  This enables us to demonstrate to customers how we can deliver a sales uplift of their most profitable products in a state of the art facility using the latest immersive 3D technology.  A number of customers have visited the site, feedback to date has been very positive and new product opportunities have emerged as a result.    

Operating margins were sustained at last year's record levels. Whilst 2012 is likely to be a year of further consolidation with revenues and margins unchanged from 2011, the Group continues to focus on improving the overall quality of the business by targeting higher margin project opportunities.

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
		Notes	2011				2010
			Before except- ional items	Except- ional items	Total		Before except- ional items	Except- ional items	Total
			£m	£m	£m		£m	£m	£m
Revenue		2	2,135	(4)	2,131		1,917	(6)	1,911
Segmental operating profit		2	374.1		374.1		319.7		319.7
Reversal of economic hedge contract
	gains			(4.1)	(4.1)			(2.7)	(2.7)
Restructuring costs				(23.5)	(23.5)			(16.0)	(16.0)
Acquired intangible amortisation				(32.3)	(32.3)			(7.0)	(7.0)
Employee benefit curtailment - UK scheme		2		-	-			15.1	15.1
Operating profit		2	374.1	(59.9)	314.2		319.7	(10.6)	309.1
Financial income		4	3.3	13.9	17.2		5.2	20.5	25.7
Financial expense		4	(20.2)	(16.0)	(36.2)		(20.5)	(8.2)	(28.7)
Net finance credit relating to defined
	benefit pension schemes		6.2		6.2		-		-
Net financial (expense)/income		4	(10.7)	(2.1)	(12.8)		(15.3)	12.3	(3.0)
Profit before tax			363.4	(62.0)	301.4		304.4	1.7	306.1
Taxation		5	(101.8)	4.1	(97.7)		(91.3)	(1.2)	(92.5)
Profit from continuing operations after tax			261.6	(57.9)	203.7		213.1	0.5	213.6
Gain from discontinued operations (net of tax)				-	-			12.8	12.8
Total profit for the year			261.6	(57.9)	203.7		213.1	13.3	226.4
Attributable to:
	Owners of the parent				200.4				224.7
	Non-controlling interests				3.3				1.7
Profit for the year					203.7				226.4
Earnings per share		6
	Basic - from profit for the year				63.2p				70.4p
	Diluted - from profit for the year				62.1p				69.4p
	Basic - from continuing operations				63.2p				66.4p
	Diluted - from continuing operations				62.1p				65.4p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
		2011		2010
		£m	£m	£m	£m
Profit for the year			203.7		226.4
Other comprehensive income/(expense)
Change in fair value of effective net investment hedge derivatives		1.9		(6.5)
Income tax effect on above		(0.5)		1.8
Exchange differences on translation of foreign operations net of hedge
settlements and funding revaluations		(9.7)		16.9
Income tax effect on above		0.3		(0.9)
			(8.0)		11.3
Fair value gain/(loss) on available for sale financial assets			1.2		(2.5)
Actuarial loss on defined benefit plans		(84.8)		(22.2)
Income tax effect		15.5		3.4
			(69.3)		(18.8)
Other comprehensive income/(expense) for the year, net of tax			(76.1)		(10.0)
Total comprehensive income for the year, net of tax			127.6		216.4
Attributable to:
Owners of the parent			123.9		214.4
Non-controlling interests			3.7		2.0
Total comprehensive income for the year, net of tax			127.6		216.4

CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2011
		Restated
	2011	2010
	£m	£m
Assets
Intangible assets	497.2	519.3
Property, plant and equipment	248.3	241.3
Employee benefit assets	1.9	1.6
Deferred tax assets	75.7	56.3
Other receivables	5.5	4.9
Other financial assets	4.9	7.0
Total non-current assets	833.5	830.4
Inventories	323.6	288.0
Trade and other receivables	388.1	345.2
Other current financial assets	7.2	12.3
Current tax	12.1	4.8
Investments	20.4	19.2
Cash and cash equivalents	147.9	122.9
Total current assets	899.3	792.4
Total assets	1,732.8	1,622.8
Liabilities
Bank overdraft	(0.4)	(2.5)
Interest-bearing loans and borrowings	(13.3)	(13.2)
Provisions	(21.6)	(13.9)
Current tax	(31.4)	(36.8)
Trade and other payables	(484.1)	(422.8)
Other current financial liabilities	(7.1)	(4.6)
Total current liabilities	(557.9)	(493.8)
Interest-bearing loans and borrowings	(242.4)	(252.6)
Employee benefit obligations	(205.7)	(201.0)
Provisions	(33.2)	(47.4)
Deferred tax liabilities	(39.6)	(20.5)
Other payables	(39.8)	(31.7)
Total non-current liabilities	(560.7)	(553.2)
Total liabilities	(1,118.6)	(1,047.0)
Net assets	614.2	575.8
Equity
Share capital	85.0	85.0
Share premium	169.3	168.1
Other reserves	59.0	67.4
Retained earnings	251.5	205.2
Equity attributable to owners of the parent	564.8	525.7
Non-controlling interests	49.4	50.1
Total equity	614.2	575.8

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
					Share capital	Share premium account	Capital redemption reserve	Hedging reserve	Translation reserve	Retained earnings	Total parent equity	Non-controlling interests	Total equity
					£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January 2010					84.9	166.6	7.9	7.4	41.1	91.9	399.8	2.2	402.0
Profit for the year										224.7	224.7	1.7	226.4
Other comprehensive income								(4.7)	15.7	(21.3)	(10.3)	0.3	(10.0)
Total comprehensive income								(4.7)	15.7	203.4	214.4	2.0	216.4
Issue of share capital					0.1	1.5					1.6		1.6
Dividends paid										(70.9)	(70.9)	(0.5)	(71.4)
Share based payments (net of tax)										10.3	10.3		10.3
Shares acquired for employee
	share scheme trust									(29.5)	(29.5)		(29.5)
Investment in partnership
	by UK Pension Fund										-	48.6	48.6
Income earned by partnership												(2.2)	(2.2)
At 31 December 2010					85.0	168.1	7.9	2.7	56.8	205.2	525.7	50.1	575.8
Changes in equity in 2011
Profit for the year										200.4	200.4	3.3	203.7
Other comprehensive income								1.4	(9.8)	(68.1)	(76.5)	0.4	(76.1)
Total comprehensive income								1.4	(9.8)	132.3	123.9	3.7	127.6
Issue of share capital					-	1.2					1.2		1.2
Dividends paid										(88.8)	(88.8)		(88.8)
Share based payments (net of tax)										10.6	10.6		10.6
Shares acquired for employee
	share scheme trust									(7.8)	(7.8)		(7.8)
Income earned by partnership												(4.4)	(4.4)
At 31 December 2011					85.0	169.3	7.9	4.1	47.0	251.5	564.8	49.4	614.2

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
			Restated
		2011	2010
		£m	£m
Cash flows from operating activities
Profit for the year from continuing operations		203.7	213.6
Adjustments for:
Depreciation		43.6	44.8
(Reversal of impairment)/impairment of property, plant and equipment		(2.5)	3.4
Amortisation		36.4	11.4
Impairment of intangible assets		-	0.4
Loss/(gain) on sale of property, plant and equipment		0.2	(2.9)
Loss on disposal of investments		-	0.1
Financial income		(17.2)	(25.7)
Financial expense		36.2	28.7
Net finance income relating to defined benefit pension scheme		(6.2)	-
Equity-settled share-based payment expenses		8.9	5.5
Income tax expense		97.7	92.5
Increase in trade and other receivables		(45.1)	(13.3)
Increase in inventories		(35.7)	(7.8)
Increase in trade and other payables		67.8	53.3
Decrease in provisions and employee benefits		(25.3)	(26.0)
Cash generated from the operations		362.5	378.0
Income taxes paid		(90.9)	(56.3)
		271.6	321.7
CCI investigation costs		(2.1)	(4.3)
Refund of EU fine *		-	5.4
Additional pension scheme funding		(52.9)	(16.8)
Special contribution to the UK Pension Fund		-	(48.6)
Net cash from operating activities		216.6	257.4
Cash flows from investing activities
Interest received		3.3	5.2
Proceeds from sale of property, plant and equipment		2.8	7.1
Sale of investments		1.1	0.8
Purchase of investments		(0.7)	(0.3)
Settlement of transactional derivatives		3.0	4.0
Settlement of currency derivatives hedging balance sheet		5.6	(2.7)
Income from discontinued business (Polypipe) *		-	7.4
Acquisitions of controlling interests		(8.9)	(117.4)
Acquisition of property, plant and equipment		(52.1)	(45.8)
Capitalised non-acquired intangibles		(6.8)	(5.0)
Net cash from investing activities		(52.7)	(146.7)
Cash flows from financing activities
Interest paid		(20.2)	(20.7)
Investment in pension partnership by UK Pension Fund		-	48.6
Acquisition of non-controlling interests		-	(12.4)
Payment to non-controlling interest		(4.4)	-
Purchase of own shares		(7.8)	(29.5)
Proceeds from the issue of share capital for employee share schemes		1.2	1.6
Net (repayment)/drawdown of borrowings		(16.0)	14.2
Dividends paid to non-controlling interest		-	(0.5)
Dividends paid to equity shareholders		(88.8)	(70.9)
Net cash from financing activities		(136.0)	(69.6)
Net increase in cash and cash equivalents		27.9	41.1
Cash and cash equivalents at the start of the year		120.4	75.7
Effect of exchange rate fluctuations on cash held		(0.8)	3.6
Cash and cash equivalents at the end of the year**		147.5	120.4
*  Representing profit in 2010 from operations discontinued in prior years
**  Net of bank overdrafts of £0.4m (2010: £2.5m)
Reconciliation of net cash to movement in net borrowings appears in note 9.

NOTES RELATING TO THE FINANCIAL STATEMENTS

1.  Restatement

In accordance with IFRS 3, following the finalisation of the balances relating to the Zimmerman & Jansen acquisition reported in the 2010 consolidated financial statements, the 2010 balance sheet has been restated. The details of this restatement are set out in note 3.3.

Settlement of currency derivatives hedging balance sheet has been reclassed as an investing activity. This was previously recognised as a currency fluctuation and consequently has reduced cash flow for the 12 months to 31 December 2010 by £2.7m. 

2.  Segmental analysis

Information regarding the performance of each operating segment is included below.  Performance is measured based on segmental operating profit which is the profit reported by the businesses, stated before exceptional items including restructuring, acquired intangible amortisation, reversal of economic hedge contract gains and losses and the employee benefit curtailment on the UK scheme.  Businesses enter into forward currency and metal contracts to provide economic hedges against the impact on profitability of swings in rates and values in accordance with the Group's policy to minimise the risk of volatility in revenues, costs and margins.  Segmental operating profits are therefore charged/credited with the impact of these contracts.  These contracts do not meet the technical provisions required under IAS39 for hedge accounting therefore gains and losses are reversed out of segmental profit and are recorded in net financial income and expense for the purposes of the statutory consolidated income statement.

		Segmental			Segmental operating			Segmental operating
		revenue			profit			margin
		2011	2010		2011	2010		2011	2010
BY SEGMENT		£m	£m		£m	£m		%	%
Fluid Controls		1,649	1,433		307.6	262.4		18.7	18.3
	Severe Service	572	452		88.9	78.4		15.5	17.3
	Fluid Power	767	685		150.5	113.7		19.6	16.6
	Indoor Climate	310	296		68.2	70.3		22.0	23.8
Retail Dispense		486	484		66.5	57.3		13.7	11.8
	Beverage Dispense	317	315		41.1	32.0		13.0	10.2
	Merchandising	169	169		25.4	25.3		15.0	15.0
Segmental result		2,135	1,917		374.1	319.7		17.5	16.7
Reconciliation of reported segmental revenue and operating profit
					Revenue			Profit
					2011	2010		2011	2010
					£m	£m		£m	£m
Segmental result					2,135	1,917		374.1	319.7
Reversal of economic hedge contract gains					(4)	(6)		(4.1)	(2.7)
Restructuring costs								(23.5)	(16.0)
Acquired intangible amortisation								(32.3)	(7.0)
Employee benefit curtailment - UK scheme								-	15.1
Total revenue/operating profit reported					2,131	1,911		314.2	309.1
Net financial expense								(12.8)	(3.0)
Profit before tax - continuing operations								301.4	306.1

REVENUE BY GEOGRAPHICAL DESTINATION
								2011	2010
								£m	£m
UK								136	141
Germany								296	261
Rest of Europe								577	542
USA								580	543
Asia/Pacific								319	285
Rest of World								227	145
Total segmental revenue								2,135	1,917
Reversal of economic hedge contract gains								(4)	(6)
Total								2,131	1,911

3.  Acquisitions

3.1  Acquisitions subsequent to the year-end

Remosa

On 16 February 2012, the Group acquired Remosa SpA and related companies (collectively Remosa), a leading engineering business specialising in valves and related flow control products for severe applications, for an enterprise value of approximately £84.7m (€100m), being cash consideration of £69.8m (€82.4m) and debt assumed of approximately £14.9m (€17.6m).  The consideration was funded out of IMI's existing resources and banking facilities.

Founded in 1955 by Giulio Mambrini, Remosa is a severe service valve business based in Sardinia, Italy and was privately-owned prior to acquisition.  Remosa makes specialist valves used in critical applications in the downstream petrochemical sector and also has an established valve servicing business. 

The main Remosa manufacturing facility is located in Sardinia. The senior management and all of its 360 employees will be transferring with the business. In the 2011 calendar year, Remosa's unaudited sales were £40.7m (€48m) and underlying EBITDA was £6.8m (€8m).

Remosa will join IMI's Severe Service division and is highly complementary with Zimmermann & Jansen, which IMI acquired at the end of 2010, and will strengthen the Group's presence in the downstream petrochemical market.    The use of IMI's global sales and aftermarket infrastructure is expected to improve Remosa's geographic penetration, notably in North America, and develop its aftermarket offering.  Remosa already has a strong presence in emerging markets, including South America and Asia, with over 50% of sales coming from those markets. 

InterAtiva

On 17 February 2012, the Group acquired Grupo InterAtiva (InterAtiva), a Brazilian isolation valve business, from its founding partners for an initial cash consideration of £22m and contingent consideration up to a maximum of £21.2m to be paid based on its performance over the next three years.  The consideration is being funded out of IMI's existing resources and banking facilities. 

Founded in 1992 by Wilson Gabriel and Mauro Bilbao, InterAtiva was privately-owned and designs, assembles and distributes isolation valves to various end-markets including oil and gas, sugar and ethanol production, and water treatment.  It currently leases a 9000sq metre facility located in Sorocaba, near Sao Paolo and employs 70 people who are all transferring with the business.  In the 2011 calendar year, InterAtiva's unaudited sales were £12m and underlying EBITDA was £3m. All of the 2011 sales were in the fast-growing South American markets. 

InterAtiva will join IMI's Severe Service division and has existing strong customer relationships and approvals in Brazil with the major engineering, procurement and construction firms and also with the major oil and gas companies.  With an experienced management team, and capacity for final assembly, it will be a strong platform for IMI's existing severe service isolation valve brands, including Orton and TruFlo Rona, to enter this market. 

Given the proximity of these acquisitions to the date of approval of these financial statements, the initial accounting for them is not yet complete and consequently disclosures regarding, inter alia, the fair value of the assets and liabilities acquired, the fair value of the consideration and the amounts allocated to goodwill and intangible assets have not been given, but will be included in the Group's 2012 Interim Report.

3.2  Acquisition during the year

The Group acquired 100% of the share capital of TH Jansen Armaturen GmbH (THJ) on 17 October 2011. Consideration of £10.3m, including the overdraft acquired of £1.3m, is net of £2.2m due from the vendor, which is subject to agreement through the completion accounts process.  Net debt of £2.5m was taken on as part of the acquisition. Assuming that the acquisition of THJ had been completed on 1 January 2011, it is estimated that the Group segmental revenue and segmental operating profit would have been £2,150m and £375.4m respectively. Segmental revenue of £3.4m and segmental operating profit of £0.3m for the period since acquisition has been reported within the Severe Service segment.

The fair value of the net assets acquired was £7.7m, resulting in goodwill of £1.3m. The net assets comprised customer relationships of £6.4m, an order book of £1.1m, property, plant and equipment of £2.9m, working capital balances of £3.3m (including trade and other receivables of £3.7m) less £6.0m of net debt and deferred tax liabilities.

Transaction costs of £0.5m have been expensed and are included within administrative expenses. The fair values of the assets and liabilities acquired and the consideration for THJ have been provisionally determined at 31 December 2011.  Completion accounts have been prepared and adjustments to both consideration and the fair value of assets acquired may arise when these are finalised.

3.3  Prior year acquisition

On 31 December 2010 the Group acquired Zimmerman & Jansen for total purchase consideration of £124.4m, net of a £6.3m receivable (subsequently £6.4m due to exchange rate movements) from the vendor for amounts to be finalised in the completion accounts. Total identifiable net assets were £75.0m, resulting in goodwill of £49.4m. These amounts were deemed provisional at this date. During the first half of this year, these provisional amounts were finalised, resulting in an increase to consideration of £2.8m, represented by increases to trade and other receivables of £0.4m, decreases in trade and other payables of £0.4m, an increase in the associated deferred tax liabilities of £0.2m and an increase to goodwill of £2.2m. The 2010 balance sheet has been restated accordingly.

3.4  Non-controlling interests

The IMI Scottish Limited Partnership (the partnership) was established during the year ended 31 December 2010.  The IMI Pension Fund agreed to invest a special contribution of £48.6m made by the Group into the partnership, giving them rights to receive income of £4.4m per year for twenty years.  The partnership is fully consolidated in these accounts with the pension fund's interest presented within equity in the Group's consolidated balance sheet, separately from equity attributable to the owners of the parent.  The investment valuation at 31 December 2011 was provided by the Trustee, based on an independent valuation prepared for the Trustee in June 2011.

4.  Net financial income and expense

	2011				2010
	Interest	Financial Instru- ments	Total		Interest	Financial Instru- ments	Total
Recognised in the income statement	£m	£m	£m		£m	£m	£m
Interest income on bank deposits	3.3		3.3		5.2		5.2
Financial instruments at fair value
through profit or loss:
Designated hedges		0.7	0.7			0.5	0.5
Other economic hedges
- current year trading		8.1	8.1			9.6	9.6
- future year transactions		5.1	5.1			10.4	10.4
Financial income	3.3	13.9	17.2		5.2	20.5	25.7
Interest expense on interest bearing loans and borrowings	(20.4)		(20.4)		(20.7)		(20.7)
Interest cost capitalised	0.2		0.2		0.2		0.2
Financial instruments at fair value
through profit or loss:
Designated hedges		(0.8)	(0.8)			(0.4)	(0.4)
Other economic hedges
- current year trading		(9.0)	(9.0)			(7.3)	(7.3)
- future year transactions		(6.2)	(6.2)			(0.5)	(0.5)
Financial expense	(20.2)	(16.0)	(36.2)		(20.5)	(8.2)	(28.7)
Net finance income relating to defined benefit
pension schemes	6.2		6.2		-		-
Net financial (expense)/income	(10.7)	(2.1)	(12.8)		(15.3)	12.3	(3.0)

Included in financial instruments are current year trading gains and losses on economically effective transactions which for management reporting purposes (see note 2) are included in segmental operating profit.  For statutory purposes these are required to be shown within net financial income and expense above.  Gains or losses for future year transactions are in respect of financial instruments held by the Group to provide stability of future trading cash flows.

5.  Taxation

The total tax charge for the year was £97.7m (2010: £92.5m). This comprised tax of £101.8m (2010: £91.3m) representing an effective tax rate of 28% (2010: 30%) on profit before tax and exceptional items of £363.4m (2010: £304.4m) and a tax credit on exceptional items of £4.1m (2010: charge of £1.2m), which includes a tax credit of £15.1m on the exceptional costs of £62.0m together with a tax charge of £11.0m in connection with certain of the restructuring activities.  

6.  Earnings per ordinary share

The weighted average number of shares in issue during the year, net of shares held as treasury shares or held in trust to satisfy employee share schemes, was 317.0m, 322.5m diluted for the effect of outstanding share options (2010: 319.0m, 323.8m diluted).  Basic and diluted earnings per share have been calculated on earnings of £200.4m (2010: £224.7m).  As there is no income from discontinued operations in 2011, the basic and diluted earnings per share from continuing operations have also been calculated on earnings of £200.4m (2010: £211.9m).

The directors consider that adjusted earnings per share figures, using earnings as calculated below, give a more meaningful indication of the underlying performance because the quantum, the one-off nature, or the volatility of the items adjusted would otherwise distort it.

	2011		2010
	£m		£m
Profit for the year from continuing operations	203.7		213.6
Non-controlling interests	(3.3)		(1.7)
	200.4		211.9
Charges/(credits) included in profit for the year:
Restructuring costs	23.5		16.0
Employee benefit curtailment - UK scheme	-		(15.1)
Acquired intangible amortisation	32.3		7.0
Financial instruments excluding economic hedge contract gains and losses	6.2		(9.6)
	262.4		210.2
Taxation (credit)/charge on exceptional items	(4.1)		1.2
Earnings for adjusted EPS	258.3		211.4
Weighted average number of shares	317.0m		319.0m
Adjusted EPS	81.5p		66.3p
Diluted adjusted EPS	80.1p		65.3p

7.  Dividend

The directors recommend a final dividend of 19.0p per share (2010: 17.0p) payable on 21 May 2012 to shareholders on the register at close of business on 13 April 2012, which will absorb around £60m (2010: £54m) cash.  Together with the interim dividend of 11.0p per share paid on 12 October 2012, this makes a total distribution of 30.0p per share (2010: 26.0p per share).  In accordance with IAS10 'Events after the Balance Sheet date', this final proposed dividend has not been reflected in the 31 December 2011 balance sheet.

8.  Employee Benefits

Pension arrangements, other post-employment and other long-term employee benefit arrangements are accounted for in accordance with the requirements of IAS19.  As at 31 December 2011 the Group continues to provide pension benefits through a mixture of defined benefit and defined contribution arrangements.  Contributions to defined contribution arrangements are recognised in the consolidated income statement as incurred.

The Group has 75 different defined benefit arrangements worldwide.  The major pension and other post-employment benefit arrangements are funded with plan assets that have been segregated in a trust or foundation.  Assessments of the obligations for funded and unfunded plans are carried out by independent actuaries, based on the projected unit credit method.  Pension costs primarily represent the increase in the actuarial present value of the obligation for projected benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on the assets.  Movements in the pension assets and liabilities that arise during the year from changes in actuarial assumptions, or because actual experience is different from the underlying actuarial assumptions, are recognised through equity.

The Group also provides a number of other long-term arrangements to our employees, with benefits payable more than 12 months after the related services are rendered.  These plans are generally not funded and actuarial gains and losses are recognised in the income statement in the period in which they arise.

The Group's strategy is to move away from defined benefit arrangements towards defined contribution arrangements wherever possible and to minimise the liability of the Group.  During 2011 four defined benefit arrangements were wound-up, one was closed to new entrants and one to future accrual.

The largest defined benefit arrangement is the IMI Pension Fund in the UK ("the Fund").  This constitutes 83% of the total defined benefit liabilities and 89% of the total defined benefit assets.  The last formal triennial actuarial valuation of the Fund was carried out as at 31 March 2011.  The statement of funding principles agreed with the Trustee resulted in an actuarial deficit of £120m.  The Group agreed to pay a special contribution of £36.1m in December 2011 and further contributions of £16.8m each July from 2012 to 2016 inclusive as part of the recovery plan to close the deficit by 2016.

The Group recognises there is a risk inherent within defined benefit arrangements that the assets do not match the liabilities at any given point in time.  In advance of the IMI Pension Fund 2011 triennial actuarial valuation, the Group worked with the Trustee to mitigate the risk of a volatile funding position.  A number of important initiatives were implemented in line with this objective.

During 2011 certain Fund members accepted the Group's enhanced transfer value offer. The 31 December 2011 defined benefit obligation in respect of the Fund reflects the liability to pay transfer values in early 2012. The transfer values payable are less than the value of the liabilities measured using the underlying IAS19 assumptions, resulting in a curtailment gain. As part of the Group's offer, in addition to receiving transfer values from the Fund (which will reduce the IAS19 assets and liabilities by £27.4m each), subsequent to the year-end, the Group made payments of £8.5m to the individuals in addition to paying employers' national insurance thereon of £1.1m. The curtailment gain of £11.7m reported in this note is therefore partially offset by £9.6m additional pension costs accrued, resulting in a net gain of £2.1m, reflected in segmental operating profit.

With effect from 1 January 2012 Fund pensioners could choose to exchange future increases on their pensions for a higher current pension. The reduction in the Fund's defined benefit obligation as a result of this exercise will be reflected in the income statement for 2012.

9.  Cash flow reconciliation
Reconciliation of net cash to movement in net borrowings
	2011	2010
	£m	£m
Net increase in cash and cash equivalents	27.9	41.1
Net repayment/(drawdown) of borrowings	16.0	(14.2)
Cash inflow	43.9	26.9
Net debt acquired	(2.5)	-
Currency translation differences	(4.2)	0.1
Movement in net borrowings in the year	37.2	27.0
Net borrowings at the start of the year	(145.4)	(172.4)
Net borrowings at the end of the year	(108.2)	(145.4)

10.  Exchange rates
The income statements of overseas operations are translated into sterling at average rates of exchange for the year, balance sheets are translated at year end rates.  The most significant currencies are the Euro and the US Dollar - the relevant rates of exchange were:
		Average Rates			Balance Sheet Rates
		2011	2010		2011	2010
	Euro	1.15	1.17		1.20	1.17
	US Dollar	1.60	1.54		1.55	1.57
The movement in average exchange rates between 2010 and 2011 resulted in our reported 2011 segmental revenue and segmental operating profit being 1% and 2% higher respectively.  Whilst the US Dollar was 4% weaker against Sterling than in 2010, this was more than offset by all other major currencies being stronger. If the exchange rates as at 28 February 2012 of US$1.59 and €1.18 had been applied to our 2011 results, it is estimated that revenue and segmental operating profit would both have been 1% lower.

11.  Financial information

The preliminary statement of results was approved by the Board on 1 March 2012.  The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2011 or 2010 but is derived from the 2011 accounts.  Statutory accounts for 2010 have been delivered to the registrar of companies and those for 2011 will be delivered in due course.  Ernst & Young LLP has reported on both the 2010 and 2011 accounts.  Their reports were (i) unqualified, (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying its reports and (iii) did not contain statements under section S498(2) or S498(3) of the Companies Act  2006.

This announcement contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group.  By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of the preparation of this announcement and the Company undertakes no obligation to update these forward-looking statements.  Nothing in this preliminary announcement should be construed as a profit forecast.

This preliminary statement has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to IMI plc and its subsidiaries when viewed as a whole.

References in the commentary to segmental operating profit, operating margins and profit before tax, unless otherwise stated, relate to reported numbers after adjustment for exceptional items.  Segmental operating profit is reported as if economic currency and metals hedges were effective for financial reporting purposes.  Business segments enter into forward currency and metal contracts to provide economic hedges against the impact on profitability of swings in rates and values in accordance with the Group's policy to minimise the risk of volatility in revenues, costs and margins.  Business segmental operating profits are therefore charged/credited with the impact of those settled contracts.  In accordance with IAS39 'Financial Instruments: Recognition and Measurement', these contracts do not meet the technical provisions required for hedge accounting and gains and losses are reversed out of segmental profit and are recorded in net financial income and expense for the purposes of the statutory consolidated income statement.  References to EPS, unless otherwise stated, relate to reported EPS adjusted for the per share after tax impact of exceptional items.  The directors consider that the quantum, one off nature or volatility of these adjustments can distort the underlying performance of the Group and for this reason the commentary discusses these adjusted amounts. 

References to organic growth are to like-for-like or underlying growth and exclude the impact of exchange rate translation and acquisitions or disposals that are included in headline reported growth figures.  The organic growth is derived from excluding any contribution from acquired companies to revenues or profits in the current period until the first anniversary of their acquisition.  It also excludes the contribution to revenues or profits in both the current and comparative period from any business that has been disposed of or sold.  This adjusted growth in revenues or profits will then be compared to the adjusted prior period after its re-translation at the average exchange rates of the current period to provide the organic growth rate.

Cash conversion is the ratio of operating cash flow to segmental operating profit after restructuring costs.  Operating cash flow is the cash generated from the operations shown in the consolidated statement of cash flows less cash spent acquiring property, plant and equipment, other non-acquired intangible assets and investments; plus cash received from the sale of property, plant and equipment and the sale of investments.

The Company's 2011 Annual Report and notice of the forthcoming Annual General Meeting will be posted to shareholders on 29 March 2012.

-   ends   -

Enquiries to:

Will Shaw

Investor Relations Director                                Tel:  [phone]

Press release available on the internet at www.imiplc.com

Issued by:

Rollo Head / Charles Chichester

RLM Finsbury                                                       Tel:  [phone]

 

END

 

 

FR DBGDXGSGBGDB